Apple's Long Goodbye Continues

So you were surprised by Apple's (AAPL:Nasdaq - news - boards) warning Tuesday afternoon? Consider:

• Apple missed its already-lowered expectations in October for fourth-quarter earnings.

• It also chopped its profit forecasts for the fiscal year 2001.

• Apple has repeatedly said its sales aren't hitting targets.

• From every quarter, we have been learning that the Cube, Apple's new, absolutely gorgeous but expensive, reduced-performance box, hasn't been selling. Heck, even the companies that wanted to make add-ons for the Cube have backed away: There just isn't a large-enough installed base of these cute but impractical little machines out there to make a business for them.

• Now Stevie warns, but reassures us that "we're not happy about it, and plan to return to sustained profitability next quarter." (Yep, his words, not mine.) Gosh, Steve, I plan to get about 6 inches taller and earn a Ph.D. in Serbian linguistics by next quarter. Wish us both luck, huh?

The Apple soap opera has clearly once again run out of gas. Maybe there's just so much pixie dust in Steve Jobs' desk drawer, and he's gone to the well once too often.

Apple investors are almost as prone to zealotry as are some Apple users. (Which suggests an interesting Venn Diagram: See much overlap -- the intersection, or "union" -- between the two groups?) So I know I'll get the usual 327 angry, profane emails when these comments are posted.

I don't care. Enough is enough.

Apple has been veddy, veddy good to investors for much of this year. Without much basis, it hung in the high-$50s/low-$60s range, split-adjusted, before falling by more than half on Sept. 29. Subsequently, though we've been getting that steady drip, drip, drip of news about stagnating sales, the perennially late System X, and the rest of the usual Apple soap opera, it held pretty well in the low $20s and high teens.

Now the magic is truly, visibly gone.

We shouldn't have been surprised Tuesday afternoon. Apple is the most consumer-oriented of all personal computer companies, and after the reports from other PC makers, especially Gateway (GTW:NYSE - news - boards), we should have seen this coming.

When the PC industry gets a cold, Apple gets pneumonia.

Because one of the perils of championing a "think different" kind of machine is that you can get clobbered even worse when consumers' available dollars fall -- or worse, when their enthusiasm flags. Because they're less likely to take a perceived risk on the "second" standard if they buy at all. Consumers like to buy safe choices, and over the past year, Apple has made itself in effect the unsafe choice.

And bragged about it: "Thing Different."

Beyond the consumer business, Apple's hold in professional graphical design and publishing is still strong ... but ebbing, slowly, as more and more companies roust the nest of PowerMacs in the art department to move to their existing corporate standard, Wintel machines. I don't want to overstate here -- that's moving slowly, but it is happening.

In education sales, K-12 and especially K-6, where Apple has ruled the roost since the glory days of the Apple II, then the IIe and Iic, Wintel machines are making real inroads. Even school systems that are still Mac bastions are bringing Wintel machines, especially Dells (DELL:Nasdaq - news - boards), IBMs (IBM:NYSE - news - boards) and Gateways, into the classroom, without removing their iMacs.

Not much volume left there for Apple, I'm afraid.

No, Apple's not going away. Even at $12 or $13 a share, this is still a $4 billion company, with annual sales (CFO Fred Anderson said Tuesday) for the fiscal year 2001 of around $6 billion to $6.5 billion.

But when Apple comes in on Jan. 17 with its first-quarter report, showing a loss of a quarter of a billion dollars or so in a period when analysts expected to see a nice profit, it's going to hit the fan once again.

Apple is buried under the costs of supporting a nonstandard standard, of developing its own operating system, of an inefficient and spotty distribution system ... and of a terrible inventory problem.

There's going to be no iMac under most trees this Christmas. And under Steve's tree? Maybe a lump of coal.

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Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, neither Seymour nor Seymour Group held positions in any securities mentioned in this column, although holdings can change at any time. Seymour does not write about companies that are, or have been recently, consulting clients of Seymour Group. While Seymour cannot provide investment advice or recommendations, he invites you to send your feedback to Jim Seymour .